Separate the cash flows first
All terms are fictional, not IBKR rates. Sell 10 borrowed shares at USD 100 and cover at 90. Proceeds 1000 minus covering purchase 900 give USD 100 gross. Receiving proceeds does not remove the stock loan or obligation to return shares.
100/90 are actual assumed execution prices, so do not subtract the same spread or slippage again. The 0.1% fee applies separately to each actual turnover: 1000×0.001=1 and 900×0.001=USD 0.90. The cycle costs 1.90, not 0.1% applied just once.
| Item | Amount |
|---|---|
| Sale proceeds | 1000.00 |
| Covering purchase | 900.00 |
| Gross result | 100.00 |
| Sale fee | 1.00 |
| Purchase fee | 0.90 |
| Borrow charge | 10/3 ≈ 3.33 |
| Substitute dividend | 5.00 |
| Net result | 2693/30 ≈ 89.77 |
Time charges need explicit agreement terms
Our fictional agreement specifies constant collateral of USD 1000, a 12% simple annual rate, exactly 10 chargeable calendar days and ACT/360. The borrow charge is 1000×0.12×10/360 = USD 10/3. Twelve percent is annual, not daily.
Constant base, rate, day count and ACT/360 are separate assumptions. Real agreements can differ: collateral may be revalued, rates may change, and settlement dates and rounding matter. The table does not estimate any intermediary’s actual stock-loan charges.
| Calendar days | Base, USD | Annual rate | Day basis | Charge, USD |
|---|---|---|---|---|
| 1 | 1000.00 | 12% | 360 | 0.3333 |
| 10 | 1000.00 | 12% | 360 | 3.3333 |
Substitute dividend and net result
Also assume a substitute dividend of USD 0.50 for each of 10 shares, or 5. Interest on sale proceeds is assumed zero. Borrow charges and possible proceeds interest are separate items, not automatically the same percentage.
Net result: 100−1.90−10/3−5 = USD 2693/30 ≈ 89.77. We round to cents only at the end; actual rounding follows the agreement. Taxes and other charges are unspecified, so this is the net of the listed terms only.
A lower price does not remove obligations
Covering at 130 instead of 90 would produce 10×(100−130)=minus USD 300 before costs. In the simple model prices have no upper bound, so the short’s potential loss has no fixed ceiling.
Borrow availability, recall, collateral requirements and deficit consequences depend on instrument and agreement. Account equity is unspecified: account return and liquidation price cannot be calculated. The example does not recommend opening a short or establish eligibility in any country.
Change the charging time
Keep 100/90 prices and both fees, but assume only 1 chargeable day and no substitute dividend. What is net under the same constant collateral and rate?
Answer: 100−1.90−1000×0.12/360 = USD 2933/30 ≈ 97.77. Cycle fees remain 1.90; the time charge changed. This is another fictional case, not a change to an actual agreement.
Keep chart study and cash terms distinct
Record prices, quantity, fees on each side, loan base, annual rate, charged days and distributions externally. Student Wyckoff helps study closed bars and save analysis, but does not supply stock loans, execute shorts or calculate liquidation.
- Separate proceeds, profit and own equity.
- Record a rate with its base and time convention.
- Do not deduct the same cost twice.
Primary sources
Sources explain the mechanics and limitations; the editorial examples use invented numbers rather than market quotations.
Your next practical step
Use the first-chart guide to study closed-bar sequences and save the chosen area. Verify the short-sale cash calculation and loan terms separately against the intermediary’s agreement.
Open the chart guide ↗